On the 1st October a number of measures prescribed by the Competition Commission will come into force to introduce competition into the payment protection insurance (PPI) market.·
This is the first set of changes in this market as a result of the Competition Commission's PPI review, and will focus on ensuring that consumers and the relevant authorities are given sufficient information about PPI by providers.
In particular, firms will need to include certain information in marketing material, including the cost of PPI and make it clear that this cover is optional and available from other providers. They will also have to provide an annual review setting out the cost of PPI and including a reminder of the consumer's right to cancel.
Commenting ahead of the introduction of these provisions, Ben Heffer, Insight Analyst for Life and Protection at independent financial research company Defaqto, said:
"These changes represent another key step in addressing the well documented problems in the PPI market. Critically, a line needs to be drawn under PPI to restore consumer confidence in protection products as a whole - and ensuring transparency in this market for consumers is a big step towards this.
"These measures will remind consumers of the need to review what cover they have and, if necessary, to shop around for an alternative policy that may more fully meet their needs. In addition, they will regularly prompt consumers to assess their protection needs more generally.
"It is important for people to have appropriate protection in place for their needs and circumstances. Crucially, when comparing protection products people need to focus on the features and benefits that different policies offer, rather than price, to ensure they arrange cover that matches their requirements.
"Indeed, customers may be best served by upgrading the type and level of cover they have in place - to cover a percentage of their income and not just loan payments for example - to ensure their protection needs are fully met."
Defaqto's Star Ratings for critical illness products, income protection insurance and mortgage payment protection insurance aim to help people understand the overall level of features and benefits that different protection policies offer.
Taking a wide range of elements into account, Defaqto has given each product on the market a rating from 1 to 5 depending on how comprehensive they are. The key is for people to identify the right level of insurance for their needs, whether this happens to be a 1, 2, 3, 4 or 5 Star Rated product.
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